Bursting Kyoto’s Hot Air Bubble (COP18 analysis)

One of the real hot issues in Doha was how Parties would deal with the 13 billion left over pollution permits from the first Kyoto commitment period.

These so called Assigned Amount Units (AAUs) are owned mostly by countries of the former Soviet bloc. They are called ‘hot air’ because they are the result of accounting dealings and not actual emissions reductions. Countries that hold AAUs, especially Poland, Russia and the Ukraine, made it very clear that they wanted to keep their hot air and use it in the new commitment period either for their own emission reduction pledges or to sell the permits. Yet if the 13 billion permits were used fully, then countries would basically not have to do anything to protect the climate until 2026.[1]

An agreement depended on the support from the European Union. However, the EU did not have internal agreement on the issue because Poland refused to give up their 800 million hot air permits. Together with Russia, who owns almost 7 billion and Ukraine who has another 3 billion hot air permits, Poland threatened to stop any meaningful decision that would eliminate these spare permits once and for all.

Until the very end it was unclear if countries could find a solution. The negotiating was intense and was only resolved on the very last day, when a package of compromises on all issues was approved. The final decision that was approved in Doha includes the following:

Countries that take a reduction target under the second commitment period of the Kyoto Protocol can use their own AAU surplus to meet their own targets.

Countries that take a reduction target under the second commitment period can buy up to 2% of the number of AAUs they received under the first commitment period from other countries.

Commitments made by countries for the second commitment period have to be stringent enough that they are unlikely to create new hot air.

There is no mentioning of cancellation of surplus in 2020. It therefore remains unclear what will happen to any of the remaining surplus of emission permits at the end of the second commitment period

EU, Japan, Australia, Norway, Switzerland, Lichtenstein, and Monaco made political statements not to buy AAU surplus from other countries to meet their commitments.

First reactions from Ukraine, Belarus and Kazakhstan

This outcome means that some but far from all hot air will be used until 2020. It also means that countries have to take a commitment for the second commitment period that does not allow them to increase their emissions from what they were on average between 2008-10.

Mainly because of the latter, Ukraine, Belarus and Kazakhstan have all since threatened to withdraw from the second commitment period (Russia had always said that it would not join).

If they withdraw, these countries can no longer participate in Joint Implementation (JI) projects and will hence lose potential investment opportunities. In reality, it would be better for these countries if they did participate because it would enable them to build their capacity on climate change mitigation. It also would show that the international process can indeed, at least partially, deliver meaningful results. If these countries left, it would send a bad signal indicating that whenever we succeed in strengthening the commitments and rules, countries will refuse to participate. This would not bode well for a future agreement that is supposed to include all countries starting in 2020.